Question

Athena Paper Corporation acquired for cash 100% of the outstanding common stock of Georgia, Inc., a supplier of wood pulp. The purchase price of $4,500,000 was significantly higher than the book value of Georgia's net assets (assets less liabilities) of $2,800,000. The Athena controller recorded the difference of $1,700,000 as an asset, goodwill.

Required:1. Discuss the meaning of the term goodwill.2. In what situation would the Athena controller be correct in her valuation of goodwill?